Most of Next Year's Budget Was Decided Last Year: Reviewing the Cost Base

Open the model and look at where the money sits. The overwhelming majority of it is last years cost base, carried forward with an inflation assumption on top. The genuinely new requests the extra heads, the new programme, the system are a small slice.

Now look at where the six weeks of argument go. Almost all of it is spent on that small slice. The base passes through untouched because it passed through last year, and the year before, and nobody can remember who approved it originally.

So the process applies its heaviest scrutiny to the smallest number, and none at all to the largest.

This is how cost structures drift. Not through bad decisions, but through decisions that were right four years ago and have never been revisited. A tool nobody uses. A team built for a product that was discontinued. A contract renewed by default every January.

The answer is not zero-basing the company. That is a six-week exercise finance teams start with enthusiasm and quietly abandon in October.

It is rotation. Pick a third of the base each year and review it properly, as though it were a new request: what does this buy, what happens if we stop, who owns it. Rotate so the whole structure gets challenged every three years.

You will not find savings everywhere. You will find them somewhere, and you will find out what the rest is actually for.